Estimating the Effects of Consumer Incentive Programs on Domestic Automobile Sales

The authors investigate the effects of consumer sales promotion on automobile sales, the largest dollar volume durable goods category in retailing. Between 1985 and 1987, the domestic automakers offered major year-end promotions on automobiles, using low-rate financing and cash rebates to stimulate sales. This paper evaluates the sales patterns for 1983 through 1987, explicitly estimating the effects of the incentive programs. The analysis indicates that the 1985 and 1986 promotional campaigns were quite successful, but that the 1987 campaign was largely ineffective. The 1986 and 1987 promotions were also followed by large postpromotion drops in sales.